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The United States military budget accounts for over 40% of the world’s annual military expenditures and, at around $700 billion per year, more than 20% of the federal budget. The Federal government wants to curb that spending as part of deficit reduction.

Last week’s deficit deal calls for up to $350 billion in cuts over the next decade on the departments of Defense, State, Homeland Security and Veterans Affairs, among others. And, if the debt “super-committee” fails to reach a deal on $1.2 trillion in budget cuts, it will automatically trigger an additional $500 billion in cuts over the next decade.

Growing obligations: Much like other public sector groups, the Pentagon has growing liabilities coming from pension and medical insurance plans. It’s “very much a microcosm” of the problems facing the country, says Glain. The Pentagon’s liability for civilian employees is currently $60 billion and the “rate of growth is enormous,” says Glain. The figure was $15 billion a decade ago.

Accounting Problems: You think Enron’s accounting was troubled? The Pentagon has very little accountability when it comes to its books. Since first submitting financial accounts in 1991, the Pentagon “has been unable to account for trillions of dollars, well over almost $10 trillion by my own account,” says Glain. Conspiracy theorists suggest this is CIA money being laundered through the Pentagon, a claim Glain has some sympathy for.

Ending the Wars: Ending operations in Iraq and Afghanistan will instantly save the defense department $180 billion per year. According to Joseph Stiglitz the wars have cost the government $3 trillion and counting.

NEW YORK — Gold prices soared again Wednesday, closing in on $1,700 an ounce, as worries that governments won’t be able to grow their way out of debt caused a rush into the safe haven asset.

Gold for December delivery rose $21.80 to settle at $1,666.30 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,675.90 and as low as $1,654.40 while the spot gold price was a bit less enthusiastic adding only $3.50, according to Kitco’s gold index.

Silver prices closed up $1.66 to $41.75 an ounce.

The US Dollar index was down 0.69% at $74.02 while the euro was up 0.75% vs. the dollar.

The U.S. economy is in shambles and Americans will continue to see high unemployment and lower living standards in the years to come, Howard Davidowitz tells Henry and Aaron in the accompanying clip. Davidowitz lays much of the blame for the economy’s woes at the feet of the Obama administration, which he calls “the worst of my lifetime.”Obama “Mr. Mass Destruction”Davidowitz says that the key to Obama’s success is his ability to sell his policies to the public. He can confidently read from a teleprompter and appear competent and in control, when in reality, “it’s one big bag of empty words,” Davidowitz says of Obama’s messages.Davidowitz contends that the President’s spending, including the health-care bill, is creating massive deficits that will take the U.S. years to dig itself out of. “He is Mr. Mass Destruction,” Davidowitz says of Obama. “I mean he is a human destroyer. This guy has spent his way into oblivion and we don’t have a budget. He is surrounded by a bunch of complete incompetents, led by himself. “Housing GloomAs far as the actual economy goes, Davidowitz’s chief concern is the strained state of the housing market, from which the bad news continues to pour in. According to Davidowitz, Americans are facing an $8 trillion negative wealth effect from the bursting of the housing bubble.”We’re talking about some serious money here,” Davidowitz exclaims. “I mean this is a complete disaster and that’s why we are going to have a double dip. We’re guaranteed a double dip in housing.”Small Businesses and UnemploymentDavidowitz says that the job market is also in ruins, noting for every new job there are six applicants. As a result of the intense competition for positions, employers can offer lower wages. Young people entering the work force today can expect to make less money in their lifetime than previous generations. Considering the majority of new jobs are created by small businesses, Davidowitz argues that new regulations governing loans to small businesses are only making matters worse — both for the entrepreneurs and the millions of people out of work.”We have this insane new regulation,” Davidowitz says. “Community banks will not even be able to fill out the forms. They’ll pack up and quit. They’re already underwater. Commercial real estate is still terrible.” The Future a Massive StruggleAsked whether he thought the U.S. would experience another Great Depression, Davidowitz said the coming years will look more like Japan today vs. the U.S. in the 1930s.People will be making and spending less money and the nation as a whole will be dealing with the consequences of the deficit, he says. “We are in a struggle, day by day it’s ugly. At the core, when we look at our debt, we are going to have to deal with it.”A few months ago, while other analysts claimed that the economy would continue to follow a V-shaped recovery path, Davidowitz seemed out of step by insisting the nation’s problems were still dire. Regardless of what you think of his message or style, Davidowitz’s doom and gloom outlook now appears much more credible.

Double-Dip Recession

The economy still hasn’t escaped the possibility of a double-dip recession, says Yale economist Robert Shiller, who predicted the housing bust.

“We just went through a Great Depression scare,” he told Bloomberg.

“The Fed and the government took on extraordinary measures to prevent that,” he said. “But I think our confidence is still vulnerable.”

And confidence is the major driver of the economy, Shiller says.

He defines a double-dip recession as another downturn before the economy gets completely back to normal. “I think there’s a significant possibility of that,” Shiller said.

As for the stock and housing markets, they are still way down from their peaks, so it’s difficult to argue they’re overvalued, Shiller says.

“But we’re in this very questionable economy. So there is significant risk of further declines in both the housing and stock markets.”

Star economist Nouriel Roubini is worried about a double-dip too.

He told a recent conference that developed economies around the world will face that risk for years, thanks to exploding government debt burdens and persistent unemployment.

Meanwhile, economist Robert Reich said the United States is sliding into a double-dip recession because the labor market continues to deteriorate.

“The private sector added a measly 41,000 net new jobs in May. But at least 100,000 new jobs are needed every month just to keep up with population growth,” he recently wrote on his website. The average length of unemployment continues to increase, rising to 34.4 weeks, up from 33 weeks in April.

“Why are we having such a hard time getting free of the Great Recession? Because consumers, who constitute 70 percent of the economy, don’t have the dough,” wrote Reich, who served in three national administrations and was a secretary of labor under President Bill Clinton.

A year ago, house prices finally stopped collapsing after two years of brutal declines. Over the following few quarters, moreover, they actually rose. This led many observers to conclude that the housing bottom had been reached and that we were headed for a v-shaped bounce.Not Gary Shilling.Gary Shilling, head of economic research firm A. Gary Shilling & Co., thinks house prices still have another 10%-20% to fall. Just as bad, Gary thinks this fall will happen over the next three years, meaning that house prices won’t bottom until 2013. Most people think prices have already bottomed, or will bottom later this year or next.Why is Gary so bearish?Supply versus demand.Basically, Gary says, we still have way too many houses relative to the number of people who want to buy them. Consumers are under pressure, overloaded with debts and struggling to find work, and the mass-hallucination that investing in housing was a “sure thing” is now a distant memory. These days, many would-be home buyers are moving in with relatives or downsizing or dumping second homes. And the supply-demand balance is so out of whack, in Gary’s view, that even super-low interest rates won’t keep prices afloat.

MoneyBob NEW YORK (AP) — The Dow Jones industrials plunged below 10,000 Tuesday after traders dumped stocks on worries about the global economy and tensions between North and South Korea. The Dow fell about 190 points in late morning trading. It has fallen 1,346 points, or more than 12 percent, from its recent high of 11,205, reached April 26. The Dow and broader stock indexes all fell about 2 percent. Investors also exited the euro and commodities including oil and again sought safety in Treasury securities. Look out below!

Americans’ Mistrust of Govt. Is Rational and Warranted, But Also Dangerous”

The United States invariably does the right thing, after having exhausted every other alternative,” Winston Churchill once said.The problem is “we’re in the process of exhausting all the alternatives pretty quickly,” says William Galston, a senior fellow at the Brookings Institution.A recent CBS/NY Times poll showed only 19% of respondents say they trust the government “to do what is right all or most of the time,” while 78% believed the government is run by special interests, not for the benefit of the people.”If current levels of trust don’t improve, I don’t see how Americans can be persuaded to make sacrifices now for a better future,” says Galston, a former adviser to President Bill Clinton. “We have a few years to get our fiscal house in order before things really get out of control in ways that will be hard to reel back – the early signs are not encouraging.”With public deficits soaring and stratospheric bailouts for banks and automakers,Galston isn’t saying mistrust of government is irrational or unwarranted, but it is dangerous for society.”Unless it’s corrected we’re going to have a very hard time doing what needs to be done in the next decade or two,” he said. “So I hope we’re on the threshold of doing the right thing, not because we want to but because we have to. “

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Economic Hurricanes Dead Ahead!

My name is “MoneyBob” - On 08-25-2007, I launched this Money Blog Site, to warn people about the coming Credit Crunch, to help educate people about Personal Finance, and to show them how to prosper in today’s economic challenges. I am terribly addicted to reading and understanding past and present economic history and trends, and how they can or will affect our personal financial future.